The European Central Bank published a speech by President Christine Lagarde arguing that Europe should not try to match the United States by promoting euro-denominated stablecoins. She said the current debate conflates stablecoins' monetary function with their technological function, and that while euro stablecoins could briefly support demand for euro area safe assets and extend the euro's reach, the financial stability and monetary policy trade-offs outweigh those benefits. For tokenised finance, she argued that Europe should build infrastructure anchored in central bank money rather than rely on private stablecoins by default. The speech noted that stablecoins have grown from less than USD 10 billion six years ago to more than USD 300 billion, are overwhelmingly denominated in US dollars, and are highly concentrated, with nearly 90% of the market controlled by Tether and Circle. Lagarde cited run risk, including USD Coin briefly trading at USD 0.877 after Silicon Valley Bank failed in March 2023, and warned that multi-issuer EU and non-EU structures could concentrate redemption pressure on EU entities under MiCAR. She also said large-scale migration of retail deposits into non-bank stablecoins would weaken the euro area's bank-based transmission mechanism. On the technology side, she said distributed ledger technology can improve issuance, trading and atomic settlement and could help integrate Europe's fragmented market infrastructure, but stablecoins remain a weak settlement foundation because they can lose par in stress and fragment liquidity across competing instruments. As the alternative, the Eurosystem will from September offer wholesale settlement through the Pontes project, linking distributed ledger platforms to TARGET so DLT-based transactions can settle in central bank money. Lagarde said 2024 tests covered 50 transactions across nine jurisdictions and about EUR 1.6 billion in settled value, and that the Appia roadmap published in March sets out a path to a fully interoperable European tokenised financial ecosystem by 2028.
European Central Bank 2026-05-08
European Central Bank argues against promoting euro stablecoins and points to central bank money settlement from September
The European Central Bank published a speech by President Christine Lagarde arguing that Europe should not promote euro-denominated stablecoins, as their financial stability and monetary policy trade-offs outweigh potential benefits for euro demand. She instead advocates tokenised finance built on infrastructure anchored in central bank money, highlighting the Eurosystem’s Pontes project to link distributed ledger platforms to TARGET for wholesale settlement and the Appia roadmap towards a fully interoperable European tokenised financial ecosystem by 2028.